Great video by Peter Schiff on the real rate of inflation.
He mentions something called "Chain Weighted CPI" which is just despicable. So, you go to the grocery store to buy steak. You find it is too expensive, so you buy ground beef instead and voila! inflation hasn't changed!
But what do you buy if ground beef gets expensive? Chicken? And if it's too expensive, what then?
I predict, in order to maintain the facade of low inflation, they will end up substituting old shoe leather for any sort of beef and tree bark for vegetables.
After that, where will they go? Substitute dirt for breakfast cereal?
The reason the Federal Government started playing these games is because "entitlement" benefits are tied to inflation. We did this in the 70s because retirees on fixed incomes were losing purchasing power rapidly due to rising inflation. But what started happening was people starting realizing they could retire early, take Social Security and MAKE MORE MONEY by riding the inflation wave of ever increasing inflation-adjusted benefits. Our elected officials came to realize, to their horror, what they had created and what this meant.
If was after this disaster of public policy that they redefined the CPI. Redefined it to the point it no longer had any real meaning. It is now completely detached form reality. So, when I hear "pundits" point to the CPI as evidence of low inflation, I laugh.
A better indication of real inflation is at the great Shadow Stats website. Here is a graph they publish on their website comparing the 1980 methodology to the "new and improved" methodology. You can see our present inflation rate (2014) is at about 9% using the original method. The improved method (if you can call it that) shows only a paltry 2%